ESSAY- No chill: The myth of 'demographic winter'

Humanity will soon experience a "demographic winter" if we can believe a new documentary that recently premiered at the conservative Heritage Foundation. The demographic winter is supposed to result from dramatically falling global fertility rates. If current fertility trends continue, world population will top out around 2050 at 8 billion and began to decline back to 6 billion by 2100.

The documentary asserts that falling fertility rates threaten to have "catastrophic social and economic consequences." Among the dire consequences are contracting economies and social welfare systems overburdened by pensioners. The documentarians argue that vital youngsters keep economic growth humming and enable them to support their ailing elders. The film's analysis relies implicitly on life cycle consumption economics, which suggests that young workers need to buy (and produce) all of the things of the good life.

Thus the demand for housing, cars, furniture, clothing, education– just about everything– burgeons as young workers demand more goods and services. Consumption over a person's life cycle typically peaks at around age 50—by then people have their houses, cars, and so forth. Demographic Winter claims that if the merry-go-round of generational consumption stops, so too will economic growth. Jobs will disappear, fewer taxes will be collected, and improvident and childless old folks will be left to fend for themselves amid the economic rubble.

Is the assertion that a rising population produces a robust economy correct? There are reasons to doubt it. Economic demographers note that in the 20th century, economic growth has been strongest in those countries that have undergone the "demographic transition" from high to low rates of mortality and fertility.

Brown University economist Oded Galor finds that when a country undergoes the demographic transition, its economic growth generally accelerates. Having fewer children means that people have more resources to invest in themselves and their children which improves human capital. Evidence suggests that countries with high population growth rates experienced relatively lower economic growth rates in the 20th century. So there doesn't appear to be any iron law that says that sheer population growth is necessary to fuel economic growth.

The proponents of demographic winter agree that reducing the number of children dependent upon each worker does boost economic growth, but only temporarily. Eventually, the number of elderly souls dependent upon each worker begins to rise. Then econosclerosis will set in as resources are diverted from productive activities to support the consumption of the elderly. But it's not at all likely that older people in the future will dutifully follow the life-cycle consumption patterns of the past.

As we've seen, people don't get rich simply because they live in countries with more workers. People get rich because they live in countries in which workers become increasingly more productive. Higher productivity means that workers produce more output per hour. Ever increasing productivity results from a positive feedback loop of human capital (education and effective social institutions) combined with constantly improving physical capital. Rising productivity is what supplies the modern world with the plethora of goods and services that people in developed countries enjoy.

The same positive feedback loop is improving medical technologies that are already lengthening healthy lifespans. In 1935, the average 65-year-old could expect another nine years of active life without suffering a major disability. By 2015 it will be 17 years. This trend will enable increasing numbers of older people to remain longer in the workforce producing more than they consume. Already the percentage of Americans between ages 65 and 74 who are still working has risen from 20 percent in 2000 to 23 percent today.

Besides being physically healthier, advances such as memory pills and personal robots will help older people maintain and enhance their mental acuity. Even more tantalizing is the possibility that some time in this century anti-aging research could achieve actuarial escape velocity that would allow people to have indefinitely long healthy and productive lives. This means that instead of peaking, people's life cycle consumption (and production) will stretch into an open-ended future driving economic growth forward.

Finally, will societies filled with older people become more set in their ways, and less open to new ideas and innovation? No. In fact, a recent study found that people become more tolerant and politically liberal as they age. If the world somehow drifts into a demographic winter of catastrophic proportions, it won't be because of a lack of children, it will be because of a lack of imagination.

Downtown Charlottesville resident Ronald Bailey is science correspondent for Reason magazine, where this article first appeared. He's the author of Liberation Biology: A Moral and Scientific Defense of the Biotech Revolution.